What Income Do I Need To Afford A $200K House? | Bankrate (2024)

If you’re on the market for a $200,000 home, you might find that options in your price range are limited. The national median sale price for a home in July 2023 was more than double that price point at $406,700. Before you make an offer, you’ll also need to make sure you can afford the monthly payments on a $200,000 home. That depends on many factors, including your income, down payment amount and the prevailing mortgage interest rate.

Using Bankrate’s mortgage calculator, we can get a better picture of the income needed to afford a home at this price. If you come to the table with a 20 percent down payment, with a 30-year loan at 6.8 percent interest, your monthly principal and interest payments would equal about $1,043. Adding in homeowners insurance and property taxes, which will vary by location, increases the total payment — let’s call it $1,300. That amounts to $15,600 annually on mortgage payments.

Housing-affordability guidelines suggest spending no more than about one-third of your income on housing. So, by tripling the $15,600 annual total, you’ll find that you’d need to earn at least $46,800 a year to afford the monthly payments on a $200,000 home. This estimate however, does not include the 20 percent down payment you would need: On a $200K home, that’s $40,000 that needs to be paid in full, upfront. Nor does it include closing costs, which also vary by location but will likely amount to several thousand dollars more. And don’t forget to consider the ongoing costs of homeownership.

Income to afford a $200K house

When contemplating how much you can reasonably afford for a home, consider what’s known as the 28/36 rule. This rule basically states that it’s best to limit your housing costs to no more than 28 percent of your income, while spending no more than 36 percent on your debt overall (including housing).

Let’s apply the 28/36 rule to $46,800 in annual income. This amount breaks down to $3,900 per month. Setting aside 28 percent of that amount for housing would equate to $1,092. Following the 28/36 rule, that is the maximum amount you would want to lay out for housing expenses in total — including principal and interest, property taxes, insurance premiums, HOA fees (if applicable) and ongoing maintenance.

Don’t forget the 36 percent part of the 28/36 rule. That means taking stock of all of your monthly other debts, including any credit card debt, car payments or student loans. If all of these expenses combined put you over the 36 percent mark, you may need to scale back or eliminate some of that debt before buying a home, to ensure you don’t get in over your head.

In addition, with a $200,000 home budget, you’ll need to think carefully about locations that have homes are available at your price point. Some markets might be out of your reach, but that doesn’t mean there aren’t budget-friendly options out there. For example, check out markets like Buffalo, New York, where the median home price is around $208,000 per July Redfin data, and Champaign, Illinois, where it’s $200K on the dot. And remember, median means half the homes sold were above that amount, and the other half were below — so even if a particular market’s median price is above your budget, you still have a decent chance of finding a home you can afford there.

What factors determine how much you can afford?

Many different factors play a role in how much house you can comfortably afford. These include your credit score, the type of mortgage you choose, the amount of money you have available for a down payment and more.

  • Down payment: The more money you bring to the table in the form of a down payment, the smaller a loan you will need — and that, in turn, lowers your monthly mortgage expense. A sizable down payment has other benefits as well, says Jack Kammer, vice president of mortgage lending for OriginPoint. “Down payment can have a significant impact on the interest rate, as putting more money down means a less risky loan, translating to a lower interest rate,” he says. “Also, if you’re doing a conventional loan with 20 percent down, you would not have to pay the monthly mortgage insurance.”
  • Credit score: Your credit score has a big impact on the interest rate you’ll be offered, and even the type of mortgage you’ll be eligible for. The higher your score, the better. “You may be able to do a conventional loan with a 620 credit score, but your interest rate may be far higher than doing an FHA loan that is geared toward first time home buyers and buyers with lower scores,” says Kammer.
  • Debt-to-income and loan-to-value ratios: Debt-to-income ratio, or DTI, is a measure of your monthly debts versus your monthly income. This factor is a significant consideration for mortgage lenders. So is your loan-to-value ratio, or LTV, which measures the amount of your loan versus the overall value of the home you’re purchasing.
  • Financial assistance: There are numerous assistance programs that can help cover down payment and closing costs to make homebuying more accessible, particularly if you’re a first-time buyer. These programs typically offer grants and low- or no-interest loans, and they exist at the federal, state and even local level — ask your real estate agent to help you figure out which ones you might be eligible for.

Stay the course until you actually close

When you’re purchasing a home, whether you’re just getting started or in the final stages of a deal, it’s best to keep your finances in tip-top shape. This means not making any big purchases (like a new car) or running up the tab on your credit cards, both of which could impact your credit score. Remember, if your credit score declines, your lender still might decline your mortgage application.

It’s also important to have an agent you trust by your side to help you navigate the home search and negotiation process. A local real estate agent who knows the market you’re searching well can help you find a home you love within your $200,000 budget.


  • Assuming you have enough in savings to cover the down payment, closing costs and cost of regular upkeep, yes, you probably could afford a $200K home on a $50K annual salary. Using our example above, the monthly mortgage payment on a $200K home, including taxes and insurance, would be about $1,300. A $50,000 annual salary amounts to about $4,166 per month. Applying the 28/36 rule, 28 percent would be $1,166, which gives you a bit of wiggle room before you hit the max of $1,300. Of course, these figures would vary depending on your specific circ*mstances, location and mortgage rate.

  • Assuming a 20 percent down payment and an interest rate of 6.8 percent, the monthly principal and interest payment on a $200K home would be about $1,043. For the total monthly payment you’d need to add the monthly costs of homeowners insurance, property taxes and HOA fees, which will vary depending on your location.

What Income Do I Need To Afford A $200K House? | Bankrate (2024)


What Income Do I Need To Afford A $200K House? | Bankrate? ›

Assuming you have enough in savings to cover the down payment, closing costs and cost of regular upkeep, yes, you probably could afford a $200K home on a $50K annual salary. Using our example above, the monthly mortgage payment on a $200K home, including taxes and insurance, would be about $1,300.

What income is needed for a 200k mortgage? ›

What income is required for a 200k mortgage? To be approved for a $200,000 mortgage with a minimum down payment of 3.5 percent, you will need an approximate income of $62,000 annually. (This is an estimated example.)

How much house can I afford with a 1 million salary? ›

One rule of thumb is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower.

How much is the monthly payment for a 200k mortgage? ›

For a $200,000, 30-year mortgage with a 6% interest rate, you'd pay around $1,199 per month. But the exact cost of your mortgage will depend on its length and the rate you get.

How much income for a 250k mortgage? ›

If you follow the 2.5 times your income rule, you divide the cost of the home by 2.5 to determine how much money you need to earn annually to afford it. Based on this rule, you would need to earn $100,000 per year to comfortably purchase a $250,000 home.

Can I afford a 200K house on 50K? ›

Assuming you have enough in savings to cover the down payment, closing costs and cost of regular upkeep, yes, you probably could afford a $200K home on a $50K annual salary. Using our example above, the monthly mortgage payment on a $200K home, including taxes and insurance, would be about $1,300.

Is 200K household income middle class? ›

In 2020, according to Pew Research Center analysis, the median for upper income households was around $220,000 and the median for middle income households was slightly above $90,000.

How much house can I afford if I make $36,000 a year? ›

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

How much house can $3,500 a month buy? ›

A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.

What is a good credit score to buy a house? ›

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.

How much is a 15 year mortgage payment on $200 000? ›

Sample Monthly Payments On A $200K Mortgage
10-Year Mortgage Monthly Payment15-Year Mortgage Monthly Payment
6% Interest Rate$2,220$1,688
7% Interest Rate$2,322$1,798
8% Interest Rate$2,427$1,911

How to pay off a 200k mortgage in 5 years? ›

Let's say you currently owe $200,000 on your mortgage and you want to pay it off in 5 years or 60 months. In this case, you'll need to increase your payments to about $3,400 per month.

How much should you put down on a house? ›

Home sellers often prefer to work with buyers who make at least a 20% down payment. A bigger down payment is a strong signal that your finances are in order, so you may have an easier time getting a mortgage. This can give you an edge over other buyers, especially when the home is in a hot market.

What house can I afford on 40K a year? ›

If you have minimal or no existing monthly debt payments, between $103,800 and $236,100 is about how much house you can afford on $40K a year. Exactly how much you spend on a house within that range depends on your financial situation and how much down payment you can afford to invest.

What credit score is needed to buy a $300K house? ›

The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.

Can I afford a 250k house on a 40K salary? ›

Quick Rule Of Thumb: Multiply Your Annual Salary By 2.5 or 3

The quickest way to work out how much house you can afford is to multiply your annual pre-tax salary by 2.5 or 3. If you want a conservative estimate, use 2.5. If you want a more aggressive estimate, use 3.

How much house can I afford with a 50k salary? ›

If you earn $50,000 per year, you earn about $4,166.67 per month. At 28% of your income, your mortgage payment should be no more than $1,166.67 per month. Considering a 20% down payment, a 6.89% mortgage rate and a 30-year term, that's about what you can expect to pay on a $185,900 home.

How much house can I afford if I make $45000 a year? ›

On a salary of $45,000 per year, you can afford a house priced at around $120,000 with a monthly payment of $1,050 for a conventional home loan — that is, if you have no debt and can make a down payment. This number assumes a 6% interest rate.

How much house can I afford with a 60k salary? ›

The 28/36 rule holds that if you earn $60k and don't pay too much to cover your debt each month, you can afford housing expenses of $1,400 a month. Another rule of thumb suggests you could afford a home worth $180,000, or three times your salary.

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